Planet London & Planet Edinburgh

Sure, the Economist’s cover story has received heaps of attention these past few days but it’s not the most interesting or even the most important cover story published by a British political magazine last week. Though I would say this, Neil O’Brien’s “Planet London” article for the Spectator is the piece the Scottish National Party should be more interested in.

O’Brien makes a compelling case that London is now, more than ever, a place apart. Its triumph is both magnificent and dangerous. Magnificent because London is, in ways scarcely conceivable forty years ago, a global behemoth; dangerous because of the distorting effect this must have on British politics. In significant ways, O’Brien suggests, London has left the rest of the United Kingdom behind. As he puts it, London exerts an “overwhelming gravitational attraction”.

If the over-cooked housing market in London and the south-east caused problems for the rest of Britain during the Major-era recession those difficulties were trivial compared to those of today when London and the south-east are, relatively speaking, even more powerful. (There is a political problem too: the Conservatives are barely a national party any longer but, then again, nor is Labour.) Since Britain – or, rather, England – remains a grossly centralised place this is all bad news for the English provinces. It is difficult to craft policy that satisfies the needs of the north and south in equal measure.

The view from Scotland is slightly different. Here there is an alternative. As Fraser pointed out on Saturday, Scotland is more prosperous than non-London England. This could be construed as proof the Union has served Scotland well; alternatively it can be taken as evidence Scotland could be well-placed to thrive even more thoroughly if it were still further distanced from the distorting impact of London’s unavoidable supremacy. Scale matters and smaller polities can be nimble in ways their larger neighbours find difficult to match. (To take one theoretical example: the larger the polity the more probable it is that powerful special interests cancel one another out, creating a kind of policy quagmire.)

Meanwhile, by most measures Edinburgh is the second-most successful city in the United Kingdom and one that, despite the recent hit to financial services and an often incompetent council, remains handily-positioned to excell in the modern economy. O’Brien notes that “half of working-age people in inner London have degrees which is true for just a quarter in the rest of the UK”. Edinburgh, though obviously much smaller than London, is in the same position: 47% of Edinburgh working-age residents have at least an undergraduate degree. There are as many degree-holders in Edinburgh as there are in Birmingham, a city twice the size of the Scottish capital. 

Indeed, in many areas London is to Edinburgh as Edinburgh is to other British cities. Consider Gross Annual Earnings per Resident: in London these are £32,000 per annum, in Edinburgh they are £27,800 and in Birmingham £23,800. Or take a measurement of labour productivity (ie, gross value added per employee per year): in London this comes out at £63,000, in Edinburgh £52,400, in Leeds £42,700, in Birmingham £41,000 and in Glasgow £40,100. (Meanwhile, retail and commercial rents are lower in Edinburgh than in Liverpool.) Indeed, Glasgow, so often (though not always unfairly) considered a hopeless welfare-case, scores as well on these indices as most of the great English provincial cities.

Edinburgh’s gravitational pull is less powerful than London’s but, with the right improvements, it can still have a powerful effect. With the appropriate investments in transport infrastructure, welfare reform, planning regulation and housing it should – or at least could – be possible to merge, in most essentials, the Edinburgh and Glasgow markets and let the invisible hand take it from there. (Given that at least 70% of the Scottish population live within the Edinburgh-Glasgow orbit, the distorting effects we see in the London example would not be as severe in Scotland.)

As O’Brien points out, cities are the future:

The brilliant US economist Ed Glaeser has shown that the bigger a city is, the more it boosts the productivity of the people living in it. Specialisation is greater, competition and economies of scale increase, and ideas and innovation spread faster. ‘Clusters’ of specialist firms form: doctors famously gather in Harley Street, but London also has advertising, legal, financial and technology clusters. In the modern ‘knowledge economy’ these factors are more important than ever, which is why the whole world is urbanising. The top 600 cities in the world contain just 20 per cent of global population, but create 60 per cent of global GDP.

London’s success, then, is both unwittingly problematic for British politics and something that could, perhaps even should, inspire the SNP to replicate on a smaller Caledonian scale. Edinburgh is already, in some ways, a pocket-sized London; stretching its success to the west is one of the great challenges, but also opportunities, any Scottish government faces. Were I advising the First Minister I should want to trumpet Edinburgh’s success (and Aberdeen’s) and argue its spillover effects could be even greater if more decisions could be taken in the Scottish capital free from the dizzying and distorting impact of the London exceptions which make pan-UK policy-making a difficult and sometimes even fraught process.